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    Future of Indian Trade with SAARC Nation:

    Opportunities and Challenges under the

    regime of NDA Government (2014)

    Research proposal submitted to

    MMAJ ACADEMY OF INTERNATIONAL STUDIES

    Jamia Millia Islamia

    in partial fulfilment of the requirements for the admission in Ph.D.

    by

    Mayank Gupt

    MMAJ ACADEMY OF INTERNATIONAL STUDIES

    Jamia Millia Islamia,

    New Delhi-110025

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    INTRODUCTION:

    In today's world no nation exists 10 economic isolation. A nation's economy, its

    industries, service sectors, levels of income and employment and living standards are

    linked to the economies of its trading partners. The benefits of international trade accrue

    in the forms of lower domestic prices, development of more efficient methods and new

    products and a greater range of consumption choices. In an open trading system, a

    country will import those commodities that it produces relatively at a higher cost. Since

    resources are channelled from uses of low productivity to that of high productivity, gains

    from trade are attained permitting higher levels of consumption and investment. The

    world today is at a turning point. The changes that we are undergoing are global in scope,

    revolutionary, fundamental and structural in content. As we have entered the 21 st

    century a sense of optimism prevails for attaining peace and prosperity through effective

    role-play of regional as well as global organizations. Many view asia as having a varietyof characteristics in common with europe of the nineteenth century: underdeveloped

    international institutions, mixed domestic orders, rising nationalism, high but differential

    growth rates, and bitter, emotional rivalries between insecure neighbours. The success of

    states in todays world is not so much measured in terms of capacity for defending

    borders or creating uniquely national institutions, but in terms of ability to adapt to

    regional and global trends, promote exports, attract investments, and skilled labour,

    provide a beneficial environment for transnational companies, build attractive institutions

    of research and higher learning, wield political influence on the regional and global

    scene, and also brand the nation culturally in the international market-place.

    Normally foreign policy initiative is taken by the government. But occasionally in a

    democracy that India is, foreign policy initiative emerges from outside the formal

    apparatus of the government. Jawaharlal Nehru had once told the constituent assembly:

    external affairs will follow internal affairs. Though it is Indias policy in relation to

    other nations in the world, foreign policy is essentially made keeping in view the interests

    of the society at large. Hence societal inputs are extremely important in the development

    of a foreign policy. These inputs come from various sources. People, in a democratic

    society, are the most important source of foreign policy initiatives. But, views of the

    people are expressed largely by the political parties and the medianewspapers andother print media, as well as the electronic media. political parties are mainly concerned

    with acquiring power. It is in the process of their endeavour to acquire political power, or

    retain it, that the parties take up foreign policy issues and influence the policy-making

    process. Besides, India, like other modern democratic societies, has a large number of

    interest/pressure groups. These groups may be in favour of/against a proposed policy, or

    they themselves may seek to initiate policy to suit their clients, or constituencies.

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    In addition, media, social activists and movements and non-governmental organisations

    also contribute to the formulation of foreign policy. They help in regulating Indias

    behaviour towards the outside world. India has also fairly developed expert groups which

    may be, for the sake of convenience, described as the think tank. These groups study

    various foreign policy issues and convey their well-considered views to the government.This unit analyses all these institutions in order to help you to understand as to which

    non- governmental bodies make valuable inputs in foreign policy making.

    In Indian democracy, one or two or many political parties control government of the day.

    Even when one party controls the government, if it is a two party system, the second

    party acts as an opposition party and tries to influence nations foreign policy. The

    government also anticipates the opposition partys reaction and that itself becomes an

    influence in the policy process. The opposition partys policy pronouncements also

    become the policy expectations of the people whenever the opposition party becomes the

    ruling party. If a party for instance says that it will act to prevent influx of job-seeking

    people from across Bangladesh, people will hold it to implement the promise when it

    comes to power. However cynical one might be about working of democracy, the fact is

    that if a political party fails to fulfil certain important promises, it will lose its credibility

    sooner than later. This is most unlike the communist regimes where the communist party

    alone determines the foreign policy. When there are a plethora of political parties as is the

    case now in India, their influence in the making of policy depends upon their proximity to

    the seat of power. One of the major ways in which political parties influence details of

    foreign policy formulation is through their manifestos issued during the elections. Cynics

    say that party manifesto is like railway platform (in the us, incidentally, manifesto is

    called a platform) that is used for the specific purpose of boarding the train (in the case ofpolitics, to get into power) and then all forget the platform. But often, crucial issues

    raised in the manifesto become rallying points to the political activists to create public

    opinion in favour of it.Thus for instance, the congress (i) in its manifesto for the 1980

    general elections had said that if it were elected to power it would extend diplomatic

    recognition to heng samarin government in kampuchea then installed by vietnam. Indira

    Gandhi was returned to power in January 1980. The communist party of India (CPI) also

    highlighted the same issue. The CPI mps began to raise the issue in the parliament to

    pressurise the government, which eventually led her to extend recognition to heng

    samarin government in July 1980.

    The BJP, in its manifesto in 1998, had suggested setting up a national security council for

    policy making. The NSC then had found a mention in practically every major political

    party. As a matter of fact that was one innovative idea introduced by the Janata dal under

    the leadership of v. P. Singh in 1989. The intellectuals and security activists then began to

    demand from the v. P. Singh government that they fulfil the promise. Then in October

    1990 for the first time v. P. Singh established a national security council. The congress

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    party, which had also promised to set up a NSC, did not implement it though it was in

    power for five years (1991-96). In 1996 when the united front government came to

    power, it also did not implement it though it had promised to do so.

    Then came the BJP led coalition government, which formulated its national agenda for

    governance and promised to establish a national security council to analyse the military,economic and political threats to the nation and also to continuously advice the

    government. The pro-NSC groups brought pressure on the government to fulfil its

    promise to establish the NSC. Then the NDA government led by the BJPs Atal Bihari

    Vajpayee in November 1998 created an NSC for effective national security policy

    formulation.

    Smaller political parties may not lead the government, as they cannot win many seats in

    the parliament. But these parties can and do lay down the outer perimeters for the

    governments in power.

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    Details of PHD candidateMayank GUPT

    L-13 B Batla House,Jamia Nagar,New Delhi -110025Mob: +91 9990123477E-mail: [email protected]

    Scholastic Qualifications

    Qualified Junior Research Fellowship(JRF) in 2014

    Certificate in Frenchfrom Jamia Millia Islamia in 2014

    Masters of Business Administration (2011-13) from Jamia Millia

    Islamia, New Delhi

    o Modules include :Finance(Major)& Marketing (Minor)

    B.Sc.(Chemistry) from Jamia Millia Islamia, New Delhi in 2009.

    German Level I from IIT Delhi.

    MDP on Export Management from MSME.

    Academics: Seminars & Achievements

    Took a guest lecture for sales and marketing training at Godrej andLabournet workshop.

    Paper Presented atJPIET (Job Satisfaction), Meerut.

    Member of Paper Editing & Organizing Committee for theInternational Seminars.

    Workshops on Individual Development & Taking Control of Career onFeb 09, 2013 at CMS, JMI

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    Attended Youth Entrepreneurship Summit 2013on Feb 11, 2013, DelhiUniversity

    Seminar attended: Pakistan Vision in South Asia, Democratic Pakistan.Future of Financial Management, Human Resource and Knowledge

    Management, Emerging Paradigm in Marketing, Entrepreneurship&Innovation,

    Personal Details

    Date of Birth : Dec 07, 1993Father name : Pramod GuptGender : MaleMarital status : SingleNationality : IndianKnown Language : German, French,

    Spanish, English & Hindi

    CONCISE STATEMENT OF THE RESEARCH PROBLEM AND

    KEY RESEARCH QUESTION

    The context of this study is the Future Of Indian Trade With SAARC Nation:

    Opportunities And Challenges Under The Regime Of NDA Government (2014) and

    the concomitant strains in the articulation of the negotiation between regional politics

    and international trade.

    STATEMENT OF RESEARCH PROBLEM

    The International economic environment and the global political balance have undergone

    revolutionary changes since the beginning of 1980s. The Introduction of this

    development has consequently led to a continuous erosion of multilateral frame work of

    trading system: increasing internationalization of production, Further, the formation of

    regional grouping of organizations has become a trend in the world economies since the

    post world war-Il, not only to strengthen gradual economic integration for overcoming

    barriers of global trade policies but also to exploit the potential of complementarities for a

    better allocation of available resources to mutual comparative advantage.

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    The developments of a productive sector capable of responding to increases in inter

    regional demand. Further, REA (Regional Economic Association) is necessary among

    developing countries in order to increase the group's bargaining power in its economic

    and sometimes political external relations.

    The main aim of the present study is to analyse India's foreign trade with SAARC

    countries individually and with the Region (which is consortium of less developing

    countries) as a whole under the regime of NDA government.

    .

    SIGNIFICANCEOFTHESTUDY:

    Foreign trade assumes significance because they form the core component of the process

    of country's growth and employment generation. Therefore it becomes a matter of

    paramount importance to study the various options for improving the foreign trade

    relationship with various countries and developing countries in particular. Our experience

    with European Union market for Indian exports and various rigidities in terms of newer

    trade barriers makes us to think of the possibilities of improving and diversifying trade to

    the countries closer to us. An enquiry into the role of NDA governmentsrole in foreign

    trade.

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    OBJECTIVESOFTHESTUDY:

    Following are the specific objectives of the present study:

    To analyze the trends in Indias aggregate exports and imports for the

    Period 1991-92 to 2012-2013

    To analyze the SAARC intra regional trade before and after

    NDA government.

    To outline the scope for co-operation in areas like regional projects,

    Physical infrastructure and regional tourism.

    To make recommendations to improve and consolidate Indias trade with

    SAARC countries.

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    RESEARCH METHODOLOGY AND DESIGN

    The methodology will be a broad analytical framework encompassing the various

    facets of regional economic co-operation. This Framework is considered useful

    for two important reasons. The first is that it provides a rational basis for

    establishing regional economic co-operation. This helps in removing the

    apprehensions about the prospects of regional economic co-operation. The second

    reason is that this framework also facilitates in identifying the appropriate policy

    instruments and strategies for achieving the objectives of regional economic co-

    operation. The study will also outline the supporting institutional mechanisms in

    areas related to trade and investment. Such mechanisms often play a crucial role

    in strengthening the efforts of regional economic co-operation. Furthermore, the

    issues concerning regional trade liberalization are many, and to understand the

    ground realities, there is a need for having varieties of databases and adoption ofnumber of suitable approaches.

    1.5 (a) sources of data and tools of analysis:

    1. HISTORICAL ARCHIVE

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    EXPECTED ACADEMIC OUTPUT, STRATEGIC AND/OR

    PRACTICAL SIGNIFICANCE OF THE STUDY

    LITERATURE REVIEW

    Ransi Sahney and William DipPietro1 pointed out that in recent years investigation of the

    relationship between export expansion and economic growth has received considerable

    attention in the literature. The findings strongly support the argument that export

    expansion leads to higher economic growth thereby suggesting the overall superiority of

    an export led growth strategy for development to one of import substitution. The

    theoretical argument maintained in the study is that export expansion results in both more

    efficient use of resources and adoption of latest technology. Hence the authors state that

    several empirical studies assessing the importance of exports for economic growth in

    developing Countries have used exports as a factor of production by estimating

    production function based growth equation. DiePietro and Sahney conclude from their

    findings that export expansion contributes to overall economic growth and that

    the importance of exports changes with the level of development.

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    Sukumar Nandi and Basudeb Biswas' have done empirical work to investigate

    the relationship between exports and economic growth in India. Their econometric results

    show that in Indian context, causality runs one way i.e., export growth causes growth of

    national income and hence they conclude that it leads to support the hypothesis that

    exports can help economic growth of a country. However, they do point out that this iscontrary to the view in the literature that export growth cannot be helpful in the context of

    countries like India. Nandi and Biswas do admit that the study done is based on Indian

    data only and that a more broad based study covering a number of countries may shed

    more light in this direction. Empirical investigations reveal that the developing countries'

    import demand of various goods has been sensitive to relative price differences on the

    one hand, between imports and domestically produced goods and on the other, between

    imports from developing and from developed countries. These results support the view

    that growing trade among developing countries, in particular, their imports from each

    other has not been due merely to income growth but relative price differences between

    developed and developing country suppliers have played a major role. Prabirjit Sarkar'

    examines the patterns of trade movements of inter-regional terms of trade between the

    developing and developed market economies for the period 1950-80. He comes to the

    conclusion that the post-second world war period saw a tremendous growth in world

    trade in merchandise. During the three decades (1950-80), world exports and imports (of

    visible) rose at an abnormal growth rate of about 11 percent. Over the three decades the

    rates of growth accelerated from 6.4 percent during 1950-60 to above 9 percent during

    1960-70 and further to above 10 percent in the last decade, 1970-80. V.L.Ra04 states that

    foreign investments into India as a result of the trade policy changes announced since

    July 1991, is encouraged to increase at a faster rate. Foreign investors urged India toallow foreign firms to hold 100 percent stake in subsidiaries, cut tariffs and improve

    infrastructure. He states that trade reforms and other economic reforms are a good thing

    for any country. However, their usefulness depends on a credible and stable macro

    economic framework and the institutional and other mechanisms to implement and

    sustain the reforms. Emphasis should shift from debates on market vs. State,

    liberalization vs. non- liberalization and privatization vs. Nationalization to (a)

    identifying the optimal forming and sequencing of economic liberalization and (b)

    effective Government business partnership. Sen and Das5 points out that trade policy in

    India has been subject to significant shift since the beginningofthe1990's.Their

    observations are that, the policy of import liberalization implemented since early nineties

    seems to have inflated the import bill by causing expansion in the volume of imports both

    in absolute terms and as proportion to GDP when both imports and GDP are measured in

    current prices. The export link to imports seems to have lost its purpose especially with

    the premium based incentives to exporters open to sharp fluctuation and down trends.

    The export linked import licensing has contributed to an increase in the value of licenses

    issued.

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    N.N. Dhuldaya' remarked that no South Asian country would be able to enjoy the fruits

    of development if it did not join hands with others in the region. Further, there would also

    be a possibility of other well-grayed countries from outside the regional shaping thedestinies of ungrouped ones. He stated that a set of guiding principles, the

    complementarities of interests, subsidiary of functions, identification of specific areas of

    inter-regional co-operation and mutual understanding on international trade in terms of

    common interest would help,. Further, according to him there would also be freedom of

    operation across physical front to get the most out of available resources. As reported in

    the Financial Express, SAARC has made remarkable progress in terms of preparing a

    comprehensive regional study on the "causes and consequences of natural disasters and

    the protection and preservation of the environment". The committee on Environment,

    which was subsequently established, is fully engaged in the task of translating the

    recommendations of the study into concrete programs and activities.

    Arif A. Waquifl examined the development from SAARC to RECSA. India, Bangladesh,.

    Nepal, and Sri Lanka formed the Committee on Studies for Co-operation in Development

    (CSCD) in South Asia, which began its exploratory regional research program in 1977-

    78. In the first phase 1977-78 to 1982-83, the CSCD initiated and coordinated

    exploratory research primarily in the areas of Regional Economic Co-operation in South

    Asia (RECSA). These studies dealt mostly with potential areas of regional co-operation

    in trade and natural resources and infrastructure development. During its second phase,

    the CSCD organized regional research studies in other potential areas of co-operationincluding foreign exchange payments, industry, energy, technology and even politics and

    interregional relations. The third phase is collaboration with an increasing number of

    institutions and expanded still further the scope of CSCD studies into areas like

    collaborative regional industrial development and co-operation in media. He argues that

    bilateral issues and political militants should not hinder the growth of regional economic

    co-operation between SAARC countries. The benefits of such co-operation and the costs

    of non-eco-operation are both substantial. What will accelerate the movement from

    SAARC to RECSA is the underlying belief supported by the analysis of the benefits of

    co-operation and the costs of non-eco-operation that regional co-operation may be

    difficult but it must succeed.

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    REFERENCERansi Sahney and William Dipietro, "Exports, Foreign Debt and Economic Growth:

    Evidence from Cross Section Data". Indian Economic Journal, Vol. 38 1991.

    2. Sukumar Nandi and Basudeb Biswas, "Export and Economic Growth in India:Empirical Evidence". Indian Economic Journal Vol. 38 1991.

    3. Prabirjit Sarkar, "Patterns of trade and Movements of Interregional Terms of Trade

    between Developing and Developed Market Economies 1950- 80". Journal

    ofCommonMarketStudies1985.

    4. Rao VL, "Trade Reforms, Global Developments and Indian Response in Global andIndian Trade policy Changes". Anupama Publications New Delhi 1992.

    5. Sen and Das, "Import Liberalisation as a tool ofEconomicPolicyinIndia - A Perspectivefrom the mid 1980s to Dec. 1991. Anupama Publications New Delhi.

    6. Rao M.S, "Trends and Determinants of India's Foreign Trade". Chugh Publications

    New Delhi 1991.7. Dhuldaya, FinancialExpress 29.04.92.

    8. Arif A Waquif, "From SAARC TO RESCA". Financial express 24.12.92.

    9. Mukherji I.N, "Feasibility of a Prefferential Trading Arrangement in South Asia".FinancialExpress 16.04.92.

    10. Kemal AR, "Trade Expansion in South Asia: Liberalisation and Mechanisms". Mc

    MillanIndia.11.Research and Information Systems, "Economic co-operation in the SAARC Region,potential constraints and policies". Interest Publications.

    12. Mehtha R, "An Econometric model of India in SAARC link". Oxford Publishing Co.

    13. Bhargava, Mukherji, Prasad and Wadhwa, "South Asia - Towards Dynamism and Co-

    operation". South Asia Journal 1992.14. Panchamukhi, and Rao V.L, " Economic Co-operation in the SAARC Region -

    Potential Constraints and Policies". Interest Publications New Delhi.